How to answer "How is your startup better than this venture-backed company"

Many founders face a common question from investors, stakeholders, or even customers: "How is your startup better than this venture-backed company that has X number of employees and has raised $X millions?" Here are ways to answer that question and make a case for why your startup stands out:

Frederik van Lierde - Oct 25, 2023

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While the challenge might seem daunting, especially when going head-to-head with well-funded competitors, the reality is that more funding and a larger team do not always correlate to success or superiority. Here are ways to answer that question and make a case for why your startup stands out:

Agility and Flexibility

Your advantage:
Smaller teams can move quickly without the bureaucracy that sometimes comes with larger, more funded startups.

How to explain:
"We can iterate and pivot more swiftly. Our decisions are based on market feedback, and we can make changes without numerous layers of approval."

Focused Vision

Your advantage:
You have a laser-focused vision on your product or service without the pressure of pleasing multiple investors.

How to explain:
"Our clear vision allows us to stay true to our product and mission. While larger startups have to balance the interests of multiple investors, we can prioritize what's best for our customers."

Personalized Customer Service

Your advantage:
With a smaller client base, you can provide unparalleled, personalized customer service.

How to explain:
"Every customer is precious to us. They're not just another number, and we go above and beyond to make sure their needs are met."

Lean Operations

Your advantage:
Operating with less overhead can lead to profitability earlier on.

How to explain:
"We're lean and efficient. We’ve learned to maximize resources and funding, which means we can reach profitability without raising excessive external capital."

Authenticity and Passion

Your advantage:
Passion and authenticity can resonate more with customers than big marketing budgets.

How to explain:
"Our passion drives us, not investor expectations. This means we're genuinely devoted to solving the problem we've identified."

Innovation Over Expansion

Your advantage:
Instead of using funds to simply scale, you're reinvesting into innovation.

How to explain:
"Every dollar we make goes back into R&D and improving our product. We’re focused on being the best, not just the biggest."

Tighter Team Bond

Your advantage:
A smaller team can lead to better communication and camaraderie, which can translate into higher productivity.

How to explain:
"Our tight-knit team communicates seamlessly, ensuring that everyone is aligned with our mission and goals."

Ownership and Control

Your advantage:
Less external funding often means more control over the company's direction.

How to explain:
"We have the freedom to make the best choices for our company without the influence of external parties. This autonomy allows us to stay true to our vision."

Value Over Valuation

Your advantage:
You're more focused on creating genuine value than on inflating valuation for the next funding round.

How to explain:
"Our goal isn't just a higher valuation; it's creating a product that our customers truly value."

Unique Insights and Approach

Your advantage:
Your unique perspective can lead to a distinct approach that sets your startup apart.

How to explain:
"Our insights come from a place that's different from others in the market. This allows us to approach problems and solutions in innovative ways."

Conclusion

While large funds and big teams can be advantageous in some aspects, they don't guarantee success. As a startup founder, understanding and communicating your unique strengths, vision, and value proposition can be far more powerful than just relying on numbers. Your startup's worth isn't merely determined by the funds it has raised, but by the value it brings to its users and the market.